A guest post by Dr Sam Hart, Founder of Rosegate Tax

While most people are looking ahead to Christmas, in the tax world, not only do we have the prospect of a far scarier Budget than Halloween to contend with, but we are also conscious of the hard deadline of 6 April next year for business owners who might want to do some succession planning.

Prior to the October 2024 Budget, unquoted businesses benefited from unlimited Business Property Relief (BPR) at 100%, which meant that, for those whose wealth was largely tied up in a family business for example, there was no urgency for inheritance tax (IHT) planning because no matter what the value of their business assets, no IHT would be due. This is no longer the case.

While we have all seen the farmers’ protests in Whitehall, it seems that many business owners are unaware of how they will be affected by the changes, and the need to consider taking action now, while there is still time.

From 6 April 2026, the maximum amount of BPR that is available is £1m per individual, and this is not transferable between spouses. Any remainder will only receive relief at 50%, which while better than nothing, does mean that business families will now have to find the cash to pay a tax bill, when that cash may not be readily available. The original purpose of BPR was to prevent the need for family businesses to be sold on death, but it seems we may be entering a new era of change.

So what do business owners need to do? This will of course depend on the family and their particular circumstances and aspirations and I would always recommend you obtain tax advice tailored to your circumstances. However, there is a narrow window of opportunity for some planning, and also business owners are going to need to think about succession earlier, and more frequently if they are to avoid a big tax bill.

Between now and 6 April 2026, it is possible to still obtain unlimited BPR if there is a chargeable occasion. While death is one such occasion, gifts to other individuals are normally Potentially Exempt Transfers (PETs) which means they do not suffer an IHT charge if the donor survives seven years from the date of gift, so they are unaffected unless the donor dies within that period. Note: one of the myriad rumours around the 2025 Budget is that this will be increased to ten years.

However, gifts into trust are immediately chargeable to IHT, and so would be a way of claiming that BPR. This means that, if a family trust is the right solution, then making a gift now could mean you are able to settle significantly more value with no tax charge than if you delay until after April. Trusts are not subject to the same IHT regime as individuals and assets in trust do not suffer 40% tax on death, instead they have a lower tax regime that charges a maximum of 6% IHT every ten years. Trusts offer significant protection advantages (for example against divorce) and can be tax efficient, for the right families.

But that isn’t all that can be done. As mentioned above, gifts to individuals (e.g. younger family members) are PETs, which means there is no IHT liability on the gift. Provided the company is fully trading such that holdover relief from capital gains tax can be obtained, this means the right answer might be to look at passing businesses down the generations piecemeal over time- hence needing to look at it earlier and more frequently.

The other thing to check is Wills: the £1m BPR limit is not transferable, so in a husband and wife arrangement, each spouse needs to own £1m BPR assets in their own name to be able to benefit from maximum relief. But even if this structuring is done correctly in lifetime, if Wills are not revisited, it is likely that on first death many assets will pass to a spouse, meaning the £1m BPR amount is wasted, and the spouse is limited to their own £1m. Whether this will change in the 2025 Budget remains to be seen, but so far it seems a deliberate policy decision not to make this transferable.

April may still seem like relatively distant in terms of thinking time, but in reality it will be here sooner than you think, so if you think you may need to take some action, it would best to look at this sooner rather than later.

Disclaimer: The information in this article is for general guidance only and does not constitute personal tax, legal, or financial advice. Tax rules and reliefs can change, and their impact will depend on your individual circumstances. You should always seek advice tailored to your own situation before taking action.

If you’d like to understand how these changes might affect you, we’d be happy to introduce you to Sam for a no-obligation chat about your personal circumstances.

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